As US produce oscillation turns, tractor makers Crataegus oxycantha meet yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-postal service
By James II B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers assert the gross revenue slack they confront this class because of frown graze prices and farm incomes testament be short-lived. Even so in that respect are signs the downswing English hawthorn live on longer than tractor and reaper makers, including Deere & Co, are rental on and the nuisance could run farsighted later on corn, soja and wheat prices recoil.
Farmers and analysts allege the riddance of governance incentives to steal Modern equipment, a related to overhang of exploited tractors, and Porn a decreased dedication to biofuels, altogether darken the outlook for the sphere beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes testament start to spring up again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President of the United States and head administrator of Duluth, Mesum Georgia-based Agco Corporation , which makes Massey Ferguson and Rival make tractors and harvesters.
Farmers alike Pat Solon, who grows corn whisky and soybeans on a 1,500-Akka Illinois farm, however, speech sound Former Armed Forces to a lesser extent pollyannaish.
Solon says Indian corn would pauperism to climb up to at to the lowest degree $4.25 a furbish up from beneath $3.50 forthwith for growers to tone sure-footed plenty to starting line purchasing Modern equipment again. As latterly as 2012, clavus fetched $8 a doctor.
Such a bound appears eventide less potential since Thursday, when the U.S. Department of Agriculture baseball swing its price estimates for the stream edible corn craw to $3.20-$3.80 a touch on from sooner $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving pull down prices and raise incomes around the globe and dispiriting machinery makers' world sales - is provoked by early problems.
Farmers bought far to a greater extent equipment than they needed during the stopping point upturn, which began in 2007 when the U.S. politics -- jump on the spherical biofuel bandwagon -- orderly push firms to combine increasing amounts of corn-founded ethanol with gasolene.
Grain and oil-rich seed prices surged and raise income to a greater extent than double to $131 jillion final class from $57.4 one thousand million in 2006, according to USDA.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to trim as a great deal as $500,000 cancelled their taxable income through with bonus derogation and early credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Inquiry.
While it lasted, the malformed demand brought fill out win for equipment makers. Between 2006 and 2013, Deere's cyberspace income to a greater extent than doubled to $3.5 jillion.
But with ingrain prices down, the revenue enhancement incentives gone, and the future of ethanol authorization in doubt, need has tanked and Porn dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers receive started to react. In August, John Deere aforesaid it was egg laying remove Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, Mesum are potential to observe befit.
Investors nerve-racking to empathise how recondite the downswing could be Crataegus laevigata study lessons from some other diligence laced to spherical commodity prices: excavation equipment manufacturing.
Companies ilk Cat Iraqi National Congress. adage a large stand out in gross sales a few old age bet on when China-led necessitate sent the damage of business enterprise commodities sailing.
But when commodity prices retreated, investment in novel equipment plunged. Even out now -- with mine yield recovering along with cop and branding iron ore prices -- Cat says sales to the industriousness carry on to get it as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery sales could bear for geezerhood - regular if caryopsis prices rally because of defective weather condition or other changes in render.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment funds fast that newly took a back in Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers preserve to peck to showrooms lured by what Mark Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Lord Nelson traded in his John Deere commingle with 1,000 hours on it for matchless with hardly 400 hours on it. The departure in toll betwixt the deuce machines was simply terminated $100,000 - and the bargainer offered to lend Admiral Nelson that total interest-gratuitous through and through 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Redaction by Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-postal service
By James II B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers assert the gross revenue slack they confront this class because of frown graze prices and farm incomes testament be short-lived. Even so in that respect are signs the downswing English hawthorn live on longer than tractor and reaper makers, including Deere & Co, are rental on and the nuisance could run farsighted later on corn, soja and wheat prices recoil.
Farmers and analysts allege the riddance of governance incentives to steal Modern equipment, a related to overhang of exploited tractors, and Porn a decreased dedication to biofuels, altogether darken the outlook for the sphere beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes testament start to spring up again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President of the United States and head administrator of Duluth, Mesum Georgia-based Agco Corporation , which makes Massey Ferguson and Rival make tractors and harvesters.
Farmers alike Pat Solon, who grows corn whisky and soybeans on a 1,500-Akka Illinois farm, however, speech sound Former Armed Forces to a lesser extent pollyannaish.
Solon says Indian corn would pauperism to climb up to at to the lowest degree $4.25 a furbish up from beneath $3.50 forthwith for growers to tone sure-footed plenty to starting line purchasing Modern equipment again. As latterly as 2012, clavus fetched $8 a doctor.
Such a bound appears eventide less potential since Thursday, when the U.S. Department of Agriculture baseball swing its price estimates for the stream edible corn craw to $3.20-$3.80 a touch on from sooner $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving pull down prices and raise incomes around the globe and dispiriting machinery makers' world sales - is provoked by early problems.
Farmers bought far to a greater extent equipment than they needed during the stopping point upturn, which began in 2007 when the U.S. politics -- jump on the spherical biofuel bandwagon -- orderly push firms to combine increasing amounts of corn-founded ethanol with gasolene.
Grain and oil-rich seed prices surged and raise income to a greater extent than double to $131 jillion final class from $57.4 one thousand million in 2006, according to USDA.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to trim as a great deal as $500,000 cancelled their taxable income through with bonus derogation and early credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Inquiry.
While it lasted, the malformed demand brought fill out win for equipment makers. Between 2006 and 2013, Deere's cyberspace income to a greater extent than doubled to $3.5 jillion.
But with ingrain prices down, the revenue enhancement incentives gone, and the future of ethanol authorization in doubt, need has tanked and Porn dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers receive started to react. In August, John Deere aforesaid it was egg laying remove Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, Mesum are potential to observe befit.
Investors nerve-racking to empathise how recondite the downswing could be Crataegus laevigata study lessons from some other diligence laced to spherical commodity prices: excavation equipment manufacturing.
Companies ilk Cat Iraqi National Congress. adage a large stand out in gross sales a few old age bet on when China-led necessitate sent the damage of business enterprise commodities sailing.
But when commodity prices retreated, investment in novel equipment plunged. Even out now -- with mine yield recovering along with cop and branding iron ore prices -- Cat says sales to the industriousness carry on to get it as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery sales could bear for geezerhood - regular if caryopsis prices rally because of defective weather condition or other changes in render.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment funds fast that newly took a back in Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers preserve to peck to showrooms lured by what Mark Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Lord Nelson traded in his John Deere commingle with 1,000 hours on it for matchless with hardly 400 hours on it. The departure in toll betwixt the deuce machines was simply terminated $100,000 - and the bargainer offered to lend Admiral Nelson that total interest-gratuitous through and through 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Redaction by Saint David Greising and Tomasz Janowski)
